1. What can I appeal?
2.What is the full cash value (FCV)?
3. What is the limited property value and how is it determined?
4. What is the property class and how does it affect value?
5. What is an affidavit of value or sales affidavit?
6. What are sales ratio studies?
1. What Can I appeal?
According to ARS § 42-16051 the property owner can file an appeal it they do not agree with the Full Cash Value (FCV) or property classification. The Limited Property Value cannot be appealed unless there was an error in the calculation as outline in Arizona Revised Statute §§ 42-13301 through 42-13304.
2. What IS THE Full Cash Value (FCV)?
For property tax purposes, "Full Cash Value" (FCV) is synonymous with market value unless a statutory formula (formula required by state law to be used in establishing a value) exists. If Full Cash Value is not determined by statutory formula, only current market conditions determine the amount it may increase from one year to another. Many people are under the false impression that the Full Cash Value is limited in the amount of increase. Only the "Limited Value" has that requirement. Another misconception is that the "Full Cash Value" should be at a set percentage level below market value as has been stated in newspaper articles. The percentages referred to in the newspapers were related to "Sales Ratio" target levels (see below: What are Sale Ratios?).
3. WHAT IS THE LIMITED PROPERTY VALUE and HOW IS IT DETERMINED?
The purpose of the Limited Property Value (LPV) was to create a hedge against inflationary increases in the market value of the property. The calculations by law limit the amount of increase that can occur from one year to the next. Limited Property Value is the one used against the Primary Tax Rate.
The Limited Property Value is determined by law. State statutes provide the formulas to be used in calculating the Limited Property Value (see Arizona Revised Statutes §§ 42-13301 through 13304).
Typically, for real property, the Limited Value will increase 5% over the prior year's Limited Property Value. The Limited Property Value can never exceed the Full Cash Value.
One exception to this calculation of the Limited Property Value is if there has been a physical change (new improvements, demolition, change in land size) or change in use of the property or an erroneous assessment in prior years. In these instances, the Limited Property Value is established by the relationship (percentage) of Full Cash Value to Limited Property Value of other properties within the same Legal Classification within a specified area.
For further information, please refer to the Arizona Department of Revenue Guideline.
4. WHAT IS THE PROPERTY CLASS AND HOW DOES IT AFFECT VALUE?
Arizona's property tax system "classifies" property according to its usage. Each class of property is assigned an assessment ratio, pursuant to state law, ranging from 1% to 18 (currently) %. The assessment ratios are applied to both the Full Cash and Limited Property Values of a parcel and determine a property's "net assessed value (NAV)." All classifications within a taxing jurisdiction use the same tax rates.
Note: The information herein provided is generally correct, however, the Arizona Classification scheme is by exception. Property that does not fit into a specific classification defaults to class 2.
Below is a general description of each property class and is not all inclusive. Click the statute reference below for a more detailed definition:
Class 1 Property - Commercial, Industrial, Centrally Valued Property (A.R.S. § 42-12001)
Class 2 Property - Agriculture, Vacant Land, Salvage (A.R.S. § 42-12002)
Class 3 Property - Primary Residence or Primary Residencd of a Qualified Family Member (A.R.S. § 42-12003)
Class 4 Property - Non-Primary Residence (A.R.S. § 42-12004)
Class 5 Property - Centrally Valued Property (A.R.S. § 42-12005)
Class 6 Property - Non-Commercial Historic, Centrally Valued Property (A.R.S. § 42-12006)
Class 7 Property - Commercial Historic (A.R.S. § 42-12007)
Class 8 Property - Residential/Commerical Historic (A.R.S. § 42-12008)
Class 9 Property - Certain Improvements on Government Property (A.R.S. § 42-12009)
5. WHAT IS AN AFFIDAVIT OF VALUE OR SALES AFFIDAVIT?
An Affidavit of Value is a legal document which reports the conditions and terms of sale. These documents are filed with the County Recorder along with the Deed of Sale of the property. The affidavits are used by the Arizona Department of Revenue to generate sales ratio studies (see Sales Ratio Studies) and by county assessors to value other properties. The information contained in the Affidavits of Value is verified by the Department of Revenue and/or the county assessors before they are used to value other property.
6. WHAT ARE SALES RATIO STUDIES?
Sales ratio studies are statistical measurements which attempt to monitor both the level and dispersion of property assessments within the state. The sales ratio targets (81% & 82% statistical mean) are many times misunderstood by the public as a predetermined assessment level. By definition, a mean or median is in the middle of a population under statistical study. The targets are for an entire population of properties, not specific properties.